Given:

Current market value of equity $=$ $$2,000\mathrm{.}00$

Current book value of equity $=$ $$5,000\mathrm{.}00$

Current debt $=$ $$0\mathrm{.}00$

Current common shares outstanding $=50\mathrm{.}00$

Assume that the company issues $($borrows$)$ new debt of $$1,000\mathrm{.}00$ without any other changes to the business risk profile or its operations and business model. In addition, the company intends to keep the debt outstanding $($at its current borrowing cost$)$ forever.

New debt to be issued $=$ $$1,000\mathrm{.}00$

Borrowing cost$/$Cost of debt $($KD$)=10\mathrm{.}00\%$